Property Income: How to Unlock Cash from Your Home at Retirement

Are you reaching retirement and fear that once you stop working, you have the means to fund the rest of your life? Or, are you already retired, searching for additional income? Luckily, there are some fantastic solutions to these common problems in the UK.

With over 557,000 Brits turning to equity release in the past 20 years, it’s one of the most popular ways to supplement a UK retirees’ income. Could using the value of your property or investing in international property be the answer you’ve been searching for?

How Can I Use My Property Income?

Jason Stubbs, an experienced equity release specialist at EveryInvestor is saying that in 2022, there are amazing opportunities for homeowners over the age of 55 to unlock the money tied into their property. While the main umbrella term is equity release, a range of fantastic products have unique features, catering to different needs.

Lifetime Mortgages

Lifetime mortgages are the most widely used equity release product, with plans spanning across the UK. You can unlock up to 65% of your property value with these products while retaining full homeownership. The money you release comes with compound interest, but any debt more than the property sale’s final value will be written off.

With a lifetime mortgage, there are no compulsory repayments required in your lifetime. Instead, the loan and interest are settled from the sale of your home when you pass away or move to residential care. If you have a spouse, you can opt for a joint plan so that you can both enjoy the privilege of remaining on the property for life.

The tax-free cash can be unlocked in a lump sum, into a drawdown facility, through a combination of both, or as a monthly salary. The maximum you can receive will depend on the youngest homeowner’s age, the property’s value, and your health condition.

Homeowners do have the opportunity to pay back the interest voluntarily, and up to 10% of the loan annually, reducing the overall cost of your plan.

Home Reversion Schemes

A home reversion plan differs in that you will sell all or a portion of your property below market value. You’ll usually get between 20% and 60% of the market value, depending on your age and a detailed property valuation.

When the last homeowner dies or relocated to long-term care, the property is sold, and the lender will receive their portion, benefitting from the full sale value of your home and inflation. Like with a lifetime mortgage, your home works as collateral against the borrowed money.

Retirement Interest-Only Mortgages

The retirement interest-only mortgage (RIO) is new to the retirement mortgage scene. An RIO works the same as an equity release plan, but you are obligated to pay back the interest monthly. If you fail to do so, you might risk foreclosure. Therefore, you will need to undergo affordability checks and have some pension income to afford the monthly payments.

The additional benefits of a retirement interest-only mortgage are that the interest rates are usually lower, and you’ll leave a larger inheritance for your heirs.

You Can Consider Downsizing

The most lucrative way of using your property’s income is by selling your home. This way, you’ll gain 100% of the equity, barring paying off any existing mortgage. However, selling your property to downsizing can be a ton of work and is often emotionally stressful at an older age.

Who Can Help Me Access My Property Income?

If you want to use your property’s income, get in touch with a whole market financial adviser who specialises in retirement planning and equity release. This individual will talk you through all your options and present you with the best plans for you and your family.

In Conclusion

Retirement should be the most relaxing time of your life, but it can be stressful if you don’t have enough cash to live comfortably. Luckily, if you are one of the many UK retirees who own a home, you’re sitting with a lucrative asset that gives you some serious options. Just be sure to seek advice from someone you can trust.